In this edition of ETMarkets Smart Talk, Sachin Bajaj, Chief Investment Officer at Axis Max Life Insurance, highlights that sectors such as healthcare, infrastructure, and financials are now trading at more reasonable valuations after the recent fall.
While near-term uncertainties linked to energy prices and global cues may keep markets on edge, Bajaj remains constructive on India’s structural growth story and advises investors to stay invested and focus on quality opportunities emerging from the correction. Edited Excerpts –Q) March has been an absolute roller coaster for equity markets not just for India but across the globe. How are you reading into markets?A) Markets have been very volatile due to the recent geopolitical events. The world is going through geopolitical events for past few years, but markets reacted sharply negatively when geopolitics is coupled with energy shocks.The recent war has pushed crude higher and disrupted gas availability, which directly impacts input costs for many industries and compresses margins in the near-term.
While this creates sharp volatility, we view it more as a short-term macro event and not a structural breakdown. India’s growth story remains intact with domestic demand, policy reforms, and domestic flows, but in the short-term markets will likely trade nervously until energy prices stabilize.Q) IT sector seems to be the worst hit thanks to the AI commentary but with geopolitical tensions rising other sectors have also started to see some rub-off effect. Any sector(s) that are now available at attractive levels?A) IT sector stocks corrected due to lower relative growth and AI related risks with year-to-date underperformance of 13% versus Nifty50.However, post the recent geopolitical developments, the correction has broadened beyond IT as the spike in crude and gas supply disruptions are beginning to affect several sectors through higher input costs and margin pressure.
India, being a large oil importer, typically sees market volatility when crude moves above $80-90 per barrel. If oil prices sustain at these levels, then it will impact inflation, CAD, fiscal situation, and corporate earnings.
So far, FY26 saw single digit earnings growth and FY27 is expected to have mid to high teens growth in earnings. However, elevated commodity prices, gas shortage could impact corporate margins leading to some earnings cut for FY27 versus earlier expectations.
With the recent fall, many stocks and sectors have started to look reasonable from a valuation perspective. We see opportunities emerge in Healthcare, Pharma, select consumer discretionary, Infrastructure, Financials and select Autos.
Q) What could be the good, bad and ugly for Indian markets in the near term?A) These scenarios depend on how this war unfolds and its impact on global crude prices, supply disruption of gas and other commodities.
A swift resolution and ceasefire would benefit our markets and economy as it would mean lower commodity prices and lesser macro-economic impact. Conversely, sustained oil prices remain above $100 per barrel and ongoing disruption in global energy supply could put pressure on corporate margins and earnings.
In case this conflict prolongs, we could see sustained outflows from FPIs, pressure on corporate earnings especially for energy intensive sectors and companies and may also impact domestic flows which could intensify market volatility.
Q) FPIs have been net sellers in 2025, and the story continues in 2026 may be for a different reason now. The story seems to be changing around the FDI route as India opens up channels for Chinese investment to land into several industries. What are your views?A) The FPI and FDI have divergent narratives. FPIs have been net sellers in the past due to various factors – capital rotation towards AI themes, relatively higher valuation for Indian markets, earnings slowdown and most recently on account of higher oil prices and geopolitical developments.
On the FDI, we expect FDI to improve in the coming year due to strong macroeconomic fundamentals, policy reforms and strong domestic demand. The recent India-US trade deal also lifts a key overhang, boosting prospects for FDI inflows.
Q) Rupee seems to be hitting fresh lows every week – where do you see the currency headed and how will it impact Indian markets/economy?A) As a large oil-importing country, any change in global oil prices impact the currency. The recent rupee weakness is largely on account of the current global backdrop of higher crude prices, FPI outflows and a stronger dollar.
In the near-term, INR could be volatile with weakness bias if crude remains elevated. From markets and economy perspective, a weaker rupee helps export oriented sectors such as IT, Pharma and Gems and Jewelry etc while it has negative impact for many sectors as it raises imported inflation and increases input costs for the broader economy.Q) Will Crude @ $100/bbl and above hurt Indian markets and macros? We have been making an investment pitch to the world about our macro stability which could be challenged in the near future. What are your views?A) Global oil prices have moved up from $65-70 per barrel range to around $ 100 per barrel. A crude above $100 per barrel is clearly a macro headwind for India given our heavy import dependence. A sharp rise in oil if sustains could impact inflation, current account deficit, and growth.
That said, India’s macroeconomic framework is now markedly stronger than during past oil shocks, with ample forex reserves (11 months of import cover), ongoing fiscal consolidation, and resilient domestic demand.
While high crude prices may spark short-term market volatility and briefly strain the macro narrative, they are unlikely to impact India’s long-term investment appeal.
Q) Your advice to investors of things which one must avoid doing in the current environment? We have already seen drop in SIP flows by over 3% on a MoM basis.A) India’s long-term growth story remains firmly intact. Policy reforms, accelerating credit growth, government initiatives such as GST rate cuts, Income tax cuts, interest rate cuts likely to boost consumption in the coming year.
After two years of single digit growth, corporate earnings growth is set to rebound in FY27. Investors should avoid selling in fear amid short-term volatility from oil shocks and stay invested in quality assets to capture the upside over the long-term.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
